What do some top Myrtle Beach hotels, campgrounds, family entertainment venues, and several serial Myrtle Beach entrepreneurs all have in common? They were the beneficiaries of taxpayer subsidized SBA lending practices since 2007.

The motto of the Small Business Administration (SBA) supports entrepreneurial grit and the little guy: “The SBA helps Americans start, build and grow businesses.” Yet, proponents of Small Business Administration (SBA) loan programs will be hard pressed to justify many of the examples cited within our 2015 released OpenTheBooks Oversight Report – SBA Loans to the Wealthy Lifestyle.

In America, we should never demonize success, but we don’t need to subsidize it either. We identified taxpayer loans to luxury car companies selling Bentleys, Beverly Hills, California diamond suppliers, and upscale destination resorts in Palm Beach, Cape Cod and Lake Tahoe which do little to advance the common good.

SBA lending is supposed to “to aid small businesses which are unable to obtain financing in the private credit marketplace.” Yet, since 2007, there have been nearly 35,000 “small business” loans between $1 million and $5 million, many to companies who may have been able to obtain credit elsewhere.

SBA loans and guarantees in excess of $1 million are common. In fact, there’s a loan of this amount or greater for every three communities across America.

This week, our organization at OpenTheBooks.com took a closer look at Myrtle Beach and found that it has more than its fair share of million dollar SBA loans and guarantees. For example, the Acadian Driftwood Hotel at the Boardwalk received $4.7 million (2012), Family Kingdom obtained nearly $1 million (2012), Surf’s Up Family Fun collected $1.5 million (2007), and the Hollywood Wax Museum reaped $1.8 million (2013).

Like camping? Cypress Camping Resort received $3.7 million (2011). How about pizza? The Mellow Mushroom secured nearly $1 million (2007).

If your dog is sick, The Pet Doctor received $1.4 million on two separate transactions, the latest in 2015. If you’re sick, then go to Beach Urgent Care – subsidized twice for a grand total of $2.7 million (2015).

And how does Earthshirts – owned by Native Sons (one of the largest embroidery and screen-printers on the East Coast) – procure $2.4 million in taxpayer-subsidized, low-interest lending from the SBA (2012)? Sure looks like they could have found private financing in the regular marketplace.

But the deeper, more systemic, problem with the SBA is that the federal government just isn’t very good at picking winners and losers. When the SBA approves a loan, taxpayer money is used to pit one taxpaying business against another. Who decides? Not the market, but SBA bureaucrats who clearly have refined tastes.

Beyond these egregious examples the SBA’s private equity loan subsidy allowed $9.2 billion to flow to the some of the most successful investment banking and private investor funds in the world.

The public should be asking some hard questions: How were these industries and subsidies chosen? What’s the compelling public purpose to ask working and middle class citizens to subsidize these businesses?

Recipients should answer these questions. After all, it’s your money, not theirs.

Andrzejewski is the founder of OpenTheBooks.com. At the 5th Annual SC Tea Party Coalition Convention on Saturday, he will speak on “What on God’s Green Earth is Wrong?” For more information, go to www.southcarolinateapartycoalition.com.

VIJAYAWADA: The objective of Janmabhoomi – Maa Vooru programme is to provide better infrastructure facilities and identify genuine beneficiaries for various government welfare schemes, district collector Babu A has said.

Participating in the programme at the CVR High School here Sunday, he said SHGs in Krishna district in last three months were sanctioned `1,100 crore bank linkage loans. He said those who took loans are not using them properly.

He said those who take loans for business purpose should focus on utilizing the money for setting up business and not use the same for personal needs. He said government had sanctioned 10,000 houses for the city.

He said till date 1.2 lakh Deepam connections were sanctioned in the district.

Mayor K Sridhar said government has come out with plethora of programmes for welfare and development of different sections of the society.

He said people should come forward to avail those benefit and cooperate with city administration to make Vijayawada a model city.

Jason Berry and Stuart Hecker are well-versed in the promise and the pitfalls of online lending.

In the summer of 2011, the business partners were staving off creditors and struggling to keep the doors open at their Anaheim-based auto repair chain. They asked Wells Fargo for a capital infusion but were swiftly shot down.

Desperate, they took to the Internet and easily landed a $105,000 business advance with what some would call a last-resort lender. The deal: Give us 6 percent from your credit card receipts to repay the debt.

What seemed like a fair deal ended up bleeding them dry. The interest they paid, it turned out, was 39 percent.

We regretted it within 30 days, says Berry, managing partner of Becker Tire LLC. I cant believe we spent so much money on this thing.

The once niche market of alternative, online lending popular among small businesses with brief or spotty credit histories has exploded into a multibillion-dollar industry that offers quick and easy financing to everyone from students to homeowners. It has captured the attention of deep-pocketed investors and even large banks.

The alt-loan boom has also become synonymous with vaguely worded pricing terms, ultra-high interest rates and questions about how the firms should be classified and regulated.

STATE SCRUTINY

For those reasons, Californias Department of Business Oversight is scrutinizing more than a dozen online loan providers to get a better handle on what they do, how much business they generate and how they make their money. Many of them are headquartered in California.

The companies under the states microscope include Lending Club, Prosper Marketplace and OnDeck, industry heavyweights that have championed peer-to-peer lending the practice of people lending money to people they dont know without the participation of a financial company.

Also in the mix are players like PayPal and Kabbage, both of which issue cash advances to small businesses. PayPal is primarily an electronic payments provider. Kabbage is a financial tech company that uses algorithms to extend credit to small businesses. It recently raised $135 million in venture capital.

Officials at the Consumer Financial Protection Bureau, which regulates financial products, say they have serious concerns about these firms and want more rules in place to rein them in.

State and federal regulators are mainly concerned about how easy it is for businesses and individuals to get some types of online-based funding and their ability to repay the debts. In many cases, borrowers fill out simple forms and can get preapproved for funds in the tens of thousands of dollars, in some cases within minutes.

Such companies measure the creditworthiness of potential borrowers by checking everything from daily credit card receipts to social media presence, essentially creating their own customer-scoring models.

Were not interested in cutting off that access to financing, said Tom Dresslar, a spokesman for the California regulatory agency. California businesses and consumers have much at stake, and we have some questions about (whether) these lenders are appropriately licensed and regulated by the state.

FLUCTUATING PAYMENTS

For the owners of Becker Tire and Service Center, getting their advance was a snap. They suddenly had an influx of funds within roughly 10 days of applying, without having to dig up the reams of documentation that traditional banks expect.

But within a month of getting the money, Berry and Hecker immediately felt the weight of their repayment terms. The daily deductions of 6 percent by Merchant Cash amp; Capital were based on each days credit card sales, which fluctuated wildly. So while the repayment percentage was fixed, the actual payment amounts were not.

It became very difficult to pay my other bills while paying a fluctuating number to Merchant, Berry said.

It wasnt until later that they realized they paid almost 40 percent in interest, he said.

Borrowers in these types of scenarios are often in the dark about the online loans APR, which represents the true cost of the loan. Not all lenders will do the math for you.

Merchant, which now goes by Bizfi, says it assisted Becker Tire when no traditional banks would. The cash-advance firm was upfront about costs and does not disclose an APR because it does not issue loans, said company spokesman Lewis Goldberg.

This is a purchase of future receivables, he said.

Becker Tire says it received $15,000 as part of a class-action lawsuit against Merchant over its financial practices. Goldberg declined to discuss the details of that case, citing a confidentiality agreement.

An August study by the Federal Reserve Bank of Cleveland showed the average small-business owner says alt-lender websites make borrowing terms and conditions easy to understand. But when asked about specific products, the small businesses often answered questions, specifically about cost, incorrectly.

State regulations exist to govern disclosure of consumer and business loan terms. They strive to ensure borrowers get loan rates that are stated fully and clearly and are adequately vetted before being issued a loan, among other things.

WHOS A LENDER?

But many alternative finance companies dont consider themselves lenders and maintain theyre not technically subject to state lending laws.

Take Prosper and Lending Club, which contend theyre merely facilitating the online loans. They say the party responsible for issuing the loan is their contracting partner, WebBank, a financial institution in Salt Lake City.

Along the same lines, companies including PayPal and Square call themselves money transmitters. Firms like Kabbage dont issue loans, either; they give out cash advances, similar to what Berry obtained through Merchant. The companies advance the money to the business and deduct payments on a daily, weekly, monthly or bi-monthly basis to recoup the costs.

Theyre essentially skirting state regulation, said Eric Weaver, head of the nonprofit microlender Opportunity Fund.

Some of the lenders that are under state inquiry say they do disclose loan conditions. Bond Street said it provides customers both the interest rate and APR in all of its loan offers. SoFi, which refinances school loans, told the Register in a statement: Fairness and transparency are critical factors in our partnership with our members, and we strive to have an equally transparent approach with regulators.

The remaining lenders declined to comment, did not respond to requests for a comment or merely confirmed the inquiry.

Ironically, one growing line of business for traditional, brick-and-mortar small-business lenders is helping borrowers get out of problem online loans, says Kurt Chilcott, chief executive and president of CDC Small Business Finance.

In late 2012, CDC agreed to refinance Berrys loan with Merchant and roll it into a $125,000 Small Business Administration-backed loan at the prime lending rate plus 3.75 percent, which comes out to be roughly 7 percent.

NOT SLOWING DOWN

Refinancing may not be possible in all cases, especially when borrowers have dug themselves too deeply into debt by taking on a string of online loans to repay previous ones similar to the vicious cycle that victims of payday lenders experience.

Despite any glitches, theres no sign that online lending will slow soon.

Some of the top names are expanding with the backing of Silicon Valley venture capitalists. Lending Club went public in late 2014 with a valuation of $9billion.

And big, traditional banks seeing their retail branch and lending operations shrink are looking to tap into the alternative lending market.

JPMorgan Chase recently signed a partnership with OnDeck, and JPMorgan will use the online lender to offer rapid access to small-business loans. The service operates with JPMorgans name and capital.

Some of the money thats flowing into online lenders is being recycled into heavy marketing.

Berry, the auto shop owner, experienced this firsthand. Since paying off the Merchant loan, he receives regular mailings, emails and phone calls from similar cash-advance institutions.

They say, lsquo;So, youre saying you dont want the money? They try to make you feel stupid for not taking the money, says Berry.

Globally, lending via P2P platforms reached around US$50 billion in 2015, according to Morgan Stanley. It forecasts this will reached more than US$290 billion by 2020.

The best known platformscome from Britain and the US.However, Chinahas by far the most lending. Official figures out in Januaryput the number of P2P lenders thereat an astonishing 2612, with estimates they areturning over more than $US18 billion a month.

However,thatnumber is being culled fast as many are now failing in anticipation of tough new licensing restrictions due to be introduced by the countrys central bank in 2016.

SocietyOnesoon wasfollowed by RateSetter, which chose Australia as its first market outside Britain,where it was founded in 2010, andThinCats, aBritish business lending platform.

In May, Sydney-basedDirectMoneybecame the only listed player. However,itcalls itself a hybrid of marketplace and traditional balance sheet lender.

Melbourne-based MoneyPlacestarted lending in early December andNew Zealand outfitHarmoneywas launchedabout 18 months ago. It isis due to start matchingloans in Australiain January.

To varying degrees, all replace banks with individualor, increasingly, with other institutionallenders.

Alloffer rates of return well above cash depositsbut they should because theyare riskier. I

RateSetter,which is one of only two so far that can accept retail investments,calls its lenders savers. However,itis not that simple.

SocietyOneco-founder Matt Symonsstresses that becoming a P2P lender should notbe equated to puttingmoney in the bank.

This is an interesting alternative fixed income category that should have a small allocation,he says.

That is why most have started outonlyaccepting investments from sophisticated investors.

Thatdoesnt disqualify self-managed super funds, if they fit the sophisticateddefinition:net assets of $2.5 million or gross income for each of the past two financial years of at least $250,000.

In fact, SMSFs make up a large proportion of investors on the new platforms.

SocietyOne and Harmoneyalsoplanto go through the onerous process ofgetting aretail licence in future.

A risk mitigant peculiar to P2P lending is that each loan is fractionalised,or split, sometimes among hundreds of borrowers,similar to the way equitycrowdfundingonly requires small amounts from many investors.

However, RateSetter Australia chief executiveDaniel Foggo expects thepresentreturns will be as high as they getbecause their novelty makesinvestors demanda premium.

Returns on RateSetter in Britainare reaching5.9 per cent compared with9.9 per cent in Australia.

Comparison to other investments

Assessing the risk and likely return in company shares andproperty is more complex than a headline fixed rate on aloan. The gross returns available are, therefore, better than P2P on the riskier of thoseasset classes.

Research houseChantWest figures showaverage gross three-year returns are about18.4 per cent in public and private equity and 14 per cent for listed and unlisted property, but just 4.8 per cent on the more comparable investment of athree-year bond.

However,the yields, including the costs in each investment class, dont look so rosy.

In a recent note, AMP economist Shane Oliver said yields from a three-year bank term deposit get2.7 per cent, gross residential property yields about 3 per centand dividend yields were about6 per cent for Australian shares (with franking credits) and2.5 per cent for global shares.

However, amajor in-built costfor most of the P2P platforms is that the investor is lending to an individual, not a government orbig corporation, so the risk of default must be higher in the long run.

However, RateSetter underwrites thiswith a provision fund.This is fed by alevy on borrowers which varies according to an assessment oftherisk they will default.

There is just under $1 million, or about 5.5per cent of outstanding loans, inRateSetter Australiasprovision fund. It doesnt guarantee it can cover big losses, but in five years its British parent has not had to draw on its fund, which is close topound;1 billion.

However, rivals arguethis means the returns to lenders will be lower and it, obviously, adds borrowers costs.

Cost cuts shared

The removal of people and bricks and mortarappearsto be a major reasonP2P lenders can offer high net returns.

To earn the present one-month annualisedrate of about3.8per cent at RateSetter,cash in a term deposit would have to be locked up for at least five years andthe best rates would struggleto reach 3.5 per cent.

Although, as long as you deposit your salary every month, some online savings accounts are offering comparable interest rates. But banks have notmatched the P2P lenders longer term rates.

The ever-falling cost of software and internet bandwidth, allied with the exponential growth of publicly availablepersonal information, means it is possible for machines to automate muchof the bank risk assessmentprocesses at much lower costs.

More importantly, P2P lenders are not using their own balance sheet. Not only do they remove all the brokerand fund manager costs, which reducereturns and add to borrowing rates, they dontearn a margin on the loan.

Instead, they charge fees, whichvary from flat, one-off fees, toa few per cent of the amount. However, thesecan mount up.

Harmoney, for example, charges borrowers $NZ375 and another $NZ375 for each top up of a loan. It also charges 1.5 per cent to lenders and a combined 35 per cent sales commissionand management fee on payment protection insurance it sells to borrowers.

So far, OBrien has lentup to$450,000 via SocietyOne, including $150,000 to agribusinesses,and believesitcompares favourably with property as an investment.

I have managed funds, including property, and I have obviously done OK out of property. But you dont get the same yield because there are lots of risks and costs in property.

Like all the new lenders, Foggo makes much of RateSetterstransparency.

Itswebsite showsdata such asaverage returns, loan rates, total amount lentcompared to applications, average loan sizes, default rates and what loans are used for.

We have just released our full loan book. For all the large platforms in the UK and the US, you can see the lending returns since inception, he says

SocietyOnestarted doingthe same in December.

It is said time is money and one important cost ofmarketplace lenders is that it can take some time forborrowers to be matched with lenders.

OBrien saysit took about three months to get his money invested viaSocietyOne, althoughthat can now take a matter of hours.

However,on average, it still can be a few days.

Lending to business

ThinCatsisoneofthe few P2P lenders serving business, although severallendersthat have started withpersonal loans nowoffer business loans as well.

ThinCats Australian chiefSunilAranha, says the businessdoesnt claim to be quick.

ThinCats targetsinvestments of between $50,000 and $2 million andrequires security via a fixed and floating chargeover company assets and personal guarantees by directors. Itdoesntneed borrowerstoputuptheir family home as security, as all banks doin Australia, butitwill accepta second mortgage.

We are lending fortwotofive yearsfor growthfinance for smalltomedium-sized businesses, Aranhasays. We are quite differenttothe new SME balance sheetlenders. We dontearn a spread [interest margin], we charge a fee and we aretheonly guys notlookingtoprovide moneytomorrow.

Hybridclaims to be the future

Theonly listed marketplace lender in Australia,DirectMoney,which was floated in July,says ithas chosentobe a hybridofthe established andthe newtoavoid whatitsees as a big P2P flaw:uncertaintyover matching borrowers and lenders and, just as happens in sharemarkets,the crowdingout of retail investors.

The pure P2P modelof retail lendstoretail;the problem is you never know whenthatdeal willoccur, he says.

The wayDirectMoneygotaroundthatwastocreate a loan warehouse.

The main difference is the speed of the warehouse turnover. A small numberof loans are builtuptoabout$10 millionandsoldtooneoftwoinvestmentfunds.Investors canthen buy intothose funds, withinterestpayabletothe investor.

The warehouseisontheDirectMoneybalance sheetfor a shortperiod, during which it gets theinterestbeing paid.

To fix this, the biggestP2P lender,LendingClub,which has matched more than $US11billion so far,has setuptwomarkets. One allows investment inwhole loans, which institutions favour, and anotherfractionalisesloans.Loans are randomly selectedtobe senttoeach platform basedonthe social security numberofthe borrower.

MoneyPlacedoes itby simply banning queue jumping.

The firstmoney in isthe firstmoneyoutand we allow an equal access for retail and institution investors.

However,the big question that needs to be in the back of every investors mind is: will the P2P lender you putmoney on exist when your loan expires?

Foggois convinced there are too manymarketplace lenders in Australia.

Like a sharemarket, mostneed high volumes to get the best speed and pricing.

In Britain,there are only two P2P personal lenders of significant size- RateSetter and its predecessor,Zopa. In the US, Morgan Stanley has counted 100. But there are only three of note:LendingClub, Prosper and Avant.

Crowdfunding and investors, venture capital and seed funding – all are buzzwords thrown around in the startup world focusing on getting the money to start your own business. Securing the funds to get your business off the ground can seem like a daunting, overwhelming task. (In some cases, it is!) In reality, many businesses start out with a small business loan.

Small business loans help the new company buy supplies and technology, hire employees, and secure space and services. Knowing the basics of business loans, when they’re a good fit, and how a loan could help are key factors in launching a company.

The Basics

It’s important to start the lending process early, because it takes time. Waiting until the last minute could jeopardize launch plans, so researching a lender ahead of time is critical. Smaller banks and credit unions often have more flexible lending standards, while big banks may offer cheaper rates – so the lender you choose should depend on the individual needs of your business. You may also get rejections – potentially lots of rejections. Don’t give up, but consider reevaluating your strategy if this keeps happening to you.

When It Fits

A small business loan could be a good fit if you need money for a sound business purpose and have excellent personal and financial history. Having reasonable collateral will also make you a good candidate, since some lenders will not approve a loan without it. Lenders may hesitate to lend to a startup, but if you can make a solid business case for your need and demonstrate that you have the ability to pay it back, you have a higher chance of approval.

How It Helps

In all likelihood, you’ll still have to find ways to get money from other sources. However, a small business loan can serve as an emergency backup fund, extra money to upgrade technology and facilities, or to bridge the gap between what you can rustle up from other investors and the total cash you’ll need to launch. Just make sure you’re in the best financial shape possible before taking the big leap – the last thing you want is to end up in a position in which you can’t pay back the loan.

Obtaining a small business loan can be a fantastic way to get your business off the ground. Arming yourself with some basic knowledge and a thorough understanding of the process should help things go smoothly. Perhaps the most important thing to remember is that a reputable lender will ensure that you fully understand everything involved with obtaining the loan. If you feel uneasy, search for someone you can trust – after all, your business (and livelihood!) is on the line.

By regularly communicating, you can avoid surprising your lender with unfavorable situations, and most times, your lender can help you to manage through downtimes in the business or industry, Geter said.

For smaller, newer businesses, borrowing on terms of credit score is not always an option. Some programs, like Nusenda Credit Unions Co-Op Capital program, lend based on relationship rather than credit score. The Co-Op Capital program is a collaborative loan initiative aimed at increasing access to business capital for low-income entrepreneurs that lack adequate credit, collateral and other factors necessary to getting small business loans.

Small business loan approval rates end year on high note at big banks and institutional lenders, according to Biz2Credits December Small Business Lending IndexTM
Optimism for continued growth in loan approval percentages as new year begins

New York, NY (January 12, 2016) Approval rates at institutional lenders and big banks improved to new post-recession highs in December 2015, according to todays Biz2Credit’s December Small Business Lending Index(TM), an analysis of more than 1,000 small business loan applications on Biz2Credit.com.

As the US economy has steadily improved, big banks and institutional lenders are more frequently granting loan requests. Additionally, small banks saw an increase in December loan approval rates in what has been an up-and-down year. Meanwhile, loan approvals at credit unions and alternative lenders continued to slow despite encouraging developments in the economy.

We are seeing increasing interest from international funds seeking higher yield investments,” said Biz2Credit CEO Rohit Arora, who oversaw the research. “Institutional lenders have reduced the risks on these types of investments through digital algorithms that have automated the loan approval process and global investments are becoming more mainstream. With the weakening of emerging markets and strong value of the US dollar, we are anticipating more international funds to enter the small business finance mix.”

Big banks ($10 billion+ in assets) approved 22.9% of small business loan approvals in December, an increase by one-tenth of a percent in November.

“The big banks have maintained their aggressive approach to lending to small businesses and with the adoption of the Federal Reserves interest rate hike, I expect they will be even hungrier to grant loan requests,” explained Arora, one of the nation’s leading experts in small business finance. “The adoption of technological advancements on the digital platforms of big banks has streamlined the loan application process and has resulted in lower chances of loans defaulting, thus increasing profitability and a higher volume of loan approvals.

Lending approval rates at small banks improved to 49.1% in December, from 48.9% in November.

Small banks are approving more small business loans under the SBA loan program, which reduces the risk assumed by lenders,” added Arora. “These are low-risk, low-reward types of loans and have resulted in the increase in loan approvals over the last month.”

Loan approval rates at alternative lenders remained unchanged in December, sitting at 60.7%, their lowest rate since August 2011. Alternative lenders approval percentages have steadily declined since January 2014, coinciding with the emergence of institutional lenders in the small business lending marketplace.

“Alternative lenders are under increased pressure to offer financial products at lower prices,” Arora suggested. “They’ve struggled to adapt and this has translated to the gradually decline in loan approval rates.”

Credit unions approved 42.3% of loan applications in December – an all-time Index low – down from 42.4% in November.

Credit unions are losing market share and higher credit-quality borrowers due to their failure to adequately adapt to the technological advancements in the industry,” said Arora. “Borrowers seek speed and convenience; many credit unions are lacking in the digital department and this has resulted in their decline in popularity.”

About Biz2Credit

Founded in 2007, Biz2Credit has arranged more than $1.2 billion in small business financing and is widely recognized as the #1 online credit resource for startup loans, lines of credit, equipment loans, working capital and other funding options in the US Using the latest technology, Biz2Credit matches borrowers to financial institutions based on each companys unique profile — completed in less than four minutes — in a safe, efficient, price-transparent environment.

Contacts

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Venture North is a regional economic development and business financing organization based in Traverse City that recently expanded its service area across 10 counties in Northwest Michigan.

The Working Capital Fund is among five different business lending funds Venture North’s operates. It is designed to provide funding for machinery and equipment financing, product line expansion and other uses. Kenny said the 1st Chance Garage loan was used for equipment purchases including a wheel alignment rack and a vehicle lift.

Venture North administers more than $2.5 million in business loans, said Executive Director Laura Galbraith. Visit www.venturenorthfunding.org for information on how to apply for business financing programs.

Venture North Funding amp; Development is the business financing and support division of TraverseCONNECT, a regional economic development organization that includes the Traverse City Area Chamber of Commerce.